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China State Council: Strictly Prohibits Private Equity Funds from Engaging in Illegal Lending, "Equity in Form, Debt in Substance" and Other Activities
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The General Office of the State Council has issued guiding opinions on strengthening regulation, preventing risks, and promoting the high-quality development of private investment funds. The document calls for adherence to goal-oriented and problem-oriented approaches, addressing issues such as incomplete market access mechanisms in the private fund industry, inadequate supervision, insufficient institutional frameworks, weak coordination among ministries and between central and local authorities, failure by some government investment funds and state-owned enterprise investment funds to fully fulfill investor responsibilities, and cases where certain private funds have become tools for illegal and criminal activities, new forms of corruption, and hidden corruption. It aims to establish a regulatory framework and long-term mechanism to enhance supervision and prevent risks, promoting standardized and higher-quality industry development. The authorities emphasized maintaining proper functional positioning, coordinating overall planning, optimizing incremental growth while revitalizing existing assets, supporting high-quality players while limiting weaker ones, and improving quality and efficiency. Private equity funds are strictly prohibited from engaging in illegal lending and "equity in form, debt in substance" activities. Classified supervision will be implemented based on different dimensions such as types of investors and product categories, adopting a "one category, one policy" approach. Regulators will oversee both legal and illegal activities-imposing strict supervision on compliant institutions, resolutely shutting down illegal entities, and severely cracking down on unlawful conduct. The authorities plan to comprehensively strengthen oversight, including promoting amendments to the Securities Investment Fund Law; refining risk assessment standards for private funds; establishing a centralized risk monitoring platform for private funds; requiring the Ministry of Finance under the State Council to fulfill its responsibilities as an investor in government investment funds by strengthening budget management, performance management, state-owned asset management, and information statistics, and enforcing strict financial discipline; establishing and improving a whistleblower system for private funds; and intensifying crackdowns on illegal fundraising, embezzlement and misappropriation, self-financing and self-use, benefit transfer, illegal cross-border capital flows, and private funds’ involvement in illegal fundraising activities. (jl/da) Auto-translated by AI This article was automatically translated by AI, the original language version should be considered the authoritative version. AASTOCKS.com Limited does not guarantee its accuracy or completeness and accepts no liability for any damages or losses arising from the use of this translation. More Details
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